Jharkhand Caught In A Bind Over Adani Project

The collateral impact of a corporate war was felt in the political decision by the Jharkhand Government. The BJP-led Raghubar Das dispensation in the State could not afford to lend undue favours to the Adani Group owing to a possible backlash by the company's professional adversaries.

The Adani group that wishes to change the policy decision in its favour by invoking its political clout from New Delhi to Jharkhand has become a lump in the throat of the State Government. Much against the political wishes of BJP stalwarts, the bureaucracy in the State has warned the Government of dire consequences if it complies with the dictates of the Adanis. Result: A senior bureaucrat was sent on long leave - albeit after seeking a leave application from him.

As per the official dossier, Adani has signed an MoU with the State Government for setting up a power plant of 1600 MW and is supposed to sell 25 per cent power to the State, a stakeholder. Of the total 25 per cent production, the company has been asked to supply 12 per cent on variable rate (also known as cheaper rate) and 13 per cent at the normal rate, the rate fixed by the regulator, to the State.

The company has, however, sought certain modifications in the Stage-2 MoU. The Adanis have asked for restoration of norms in the policy decision that was in practice before 2012. Till 2012, there was no policy that bifurcated 25 per cent of the production earmarked for the State in a ratio of 12 and 13 per cent and private power-producing companies in the State were supposed to supply 25 per cent of the power production as a whole to the State at a fixed rate. Besides, the Adanis asked for withdrawal of 6 per cent environment cess that is levied on power-producing companies.

In 2012, the State Government formulated a policy about setting up power-producing units in the State by private companies and fixed their accountability towards the State by asking them to supply 25 per cent of the production to the State at a ratio of 12 and 13 per cent at variable and normal rates, respectively. Incidentally, the policy of 2012 does not envisage a break-up of 12 and 13 per cent, though it is in practice and other corporate houses involved in power production in the State have been supplying power to the State on the same 12 and 13 percent ratio. The provision for 6 percent environment cess levied on power producing companies has not been laid down in the policy decision of 2012 too.

The Adanis, however, reacted to the 'ratio system' and refused to comply with the Government order. They contended that if the norms were not included in the policy formulated by the State Government in 2012 for the purpose, how could it be imposed? They asked the Government to modify the MoU they signed to set up 1600 MW power plant in the State and restore the system of 25 per cent power supply to the State at a fixed rate. They also demanded withdrawal of environment cess.

The State Government is in a quandary: how does it deal with the other corporate houses at variance with the Adanis on professional counts? The two major companies that have been working in the power sector in the State prior to 2012 are Adhunik Power Ltd and Inland Power Limited. These two companies have been supplying 25 per cent of their production to the State on 12 per cent and 13 per cent ratio of variable rate and normal rate, respectively, complying with the Government order.

It is learnt that on a tip-off that the Government was contemplating modifications in the policy in the larger interest of the Adanis, Adhunik and Inland have expressed their reservations to compromise with the Government move to extend the special favour to the Adanis. They are also believed to ask for recovery of the accrued loss they suffered while supplying 12 per cent power to the State at a cheaper rate since commissioning of their projects in the State. The State Energy department apprehends that the possible claim for recovery of loss by Adhunik and Inland will cost the State exchequer dearly. As per an estimate, the withdrawal of variable rate and environment cess would lead to a loss of about Rs 2,000 crore to the Government kitty per year.

Consequently, the State Energy Secretary S.K.G Rahate raised his objection with the Adanis' demand for exemption from variable rate and environment cess and recommended the Government to follow the set norms that was much against the wishes of the power-sector giant. The adverse remarks by the secretary on the Adanis proposal began a virtual war of attrition between the Government and the company. Rahate also recommended the setting up of a high-powered committee to determine the fate of the Adanis' proposal. In order to allay the issue, the Government preferred to send him on a long leave.

To top it all, the pertinent question that baffles the mind of many is what led to the skirmish between the Government and Adanis? When the policy decision neither lays down the provision for a 'ratio system' nor does it speak of six per cent environment cess, how could the Adanis be unrealistic in their demand? In the light of such facts, the Adanis stand to be correct in their objection over the demand of 12 per cent power at the cheaper rate and the Government is supposed to turn down the objection raised by the energy secretary. Moreover, the apprehension about possible claim for recovery of loss on supply of power at a cheaper rate by other companies over the years could be dealt with by making amendments in the policy and enforcing fresh norms by dispensing with the 'ratio system' instead. The manner in which the issue is being dealt with also casts doubt whether the Government is willing to support the Adanis, that have enough reasons to be at the loggerheads with other corporate houses across the country after being known to be privy to the powers-that-be at the Centre in particular? But, at the same time, the State Government can not afford to ignore Adanis by going by norms under duress.